Nepal’s Critical Engagements with India and China

KM SEETHI

First Published in  Countercurrents,  5 July 2018

The tiny Himalayan State Nepal continues to be economically vulnerable, primarily because of its geopolitical status as a land-locked country. This is the case with all land-locked countries across the world that do not have direct access to the seas.  As the UN Committee for Development Policy says, these countries’  “ability to competitively trade in goods largely depends on political goodwill domestically and regionally, particularly on efforts by transit neighbours to provide a facilitating technical and administrative infrastructure in order to contain the transaction costs incurred by land-locked operators.” The UN acknowledged that many such “land-locked developing countries are marginalized in the global trading system and occupy low-end positions in international value chains” (UN, Committee for Development Policy 2018:16). The case of Nepal is too conspicuous as underlined by the UN.

It is in this background of its geopolitical vulnerability that Nepal has been struggling hard to make itself a ‘Zone of Peace’ between the two Asian giants—India and China. But this has always been viewed with suspicion and apprehension in New Delhi. During the recent visit of Nepali Prime Minister K.P. Sharma Oli to China, there were speculations apropos the tiny Himalayan State’s emerging pattern of relations with India and China. It is quite natural for some to suspect if some of Oli’s comments in China amount to bringing back the much-discussed ‘Zone of Peace’ proposal that was in place in the 1970s and 1980s.

In an interview with the Gobal Times, Oli had to encounter a question whether Nepal was the ‘land of the competition’ or ‘bridge of cooperation’ for China and India. He said that Nepal being a sovereign and independent nation “never deviated from its well-pronounced foreign policy dictum of  friendship toward all and enmity toward none.” He emphasized that Nepal has been “firmly committed to not allowing our territory to be used against the sovereign interests of our neighbours. We have the resolve to maintain this and we naturally expect similar assurance from our neighbours. Given this policy percept that guides us and given the level of goodwill and sense of solidarity both our neighbours and their people have toward Nepal, I see a good prospect of cooperation among our three countries.” Oli further noted that “Nepal can serve as a bridge between our two neighbours. In fact, we want to move from the state of a land-locked to a land-linked country through the development of adequate cross border connectivity. Our friendship with both neighbours places us in an advantageous position to realize this goal” (GT 2018).

Many wondered whether Kathmandu has been moving away from New Delhi for some time, in spite of its geopolitical proximity and other advantages it enjoys vis-à-vis India. Moreover, observers say that whatever problems that the two countries have had in the past have been addressed with the recent visits of the Prime Ministers of India and Nepal and their attempts to sort out differences on a host of issues. It was believed that Prime Minister Narendra Modi’s recent visit to Nepal (that too, within weeks of  Oli’s visit to New Delhi) would have set right the irritants in bilateral relations that developed following India’s unsolicited comments and interventions with regard to the 2015 Nepalese Constitution. Modi’s statements in Nepal on the historical connectivity, cultural linkages, democratic credentials and developmental imperatives were all aimed at winning over the Nepalese people as well as different sections of the polity in the background of China making strategic inroads into the Himalayan geopolitics (Government of India, Ministry of External Affairs 2018b). It may be noted that the two Prime Ministers also underlined the “catalytic role of connectivity in stimulating economic growth and promoting movement of people” (Government of India, Ministry of External Affairs 2018a).

India-Nepal ties worsened badly in 2015 when Nepal promulgated its long-awaited constitution which, New Delhi believed, had not given adequate attention to the Madhesis, Tharus and Janjatis in the plains. India’s Foreign Secretary S. Jaishankar made a visit to Nepal, as Modi’s special envoy, at this crucial juncture of the promulgation of the new constitution. But Jaishankar had to return empty-handed. His visit also generated widespread criticism in the Nepali media (The Rising Nepal, 20 September 2015). What followed was another spell of economic blockade from India disrupting the movement of even essentials supplies.

In 2016, during Oli’s previous term as prime minister, Nepal had made efforts to reduce its reliance on New Delhi as a major supplier of essential items like energy as well as the route for transit and trade. Oli went to China in the wake of his visit to New Delhi in February 2016 and entered into agreements for the import of fuel and on trade. This was in the background of the deteriorating relations between India and Nepal over the 2015 constitution. Many even saw New Delhi as responsible for the fall of an unstable coalition dispensation in Nepal, which eventually led to Oli’s resignation in August 2016. With Oli back in power in 2018, New Delhi sought to repair the damage by announcing new connectivity and development projects. However, during his visit to India, Prime Minister Oli underlined the need for building “mutual trust” and seeking a relationship based on friendship. This obviously echoes Nepal’s desire to diversify its relationship with the immediate neighbours keeping in view its long-held desire to escape from its underdevelopment trap set by both internal as well as geopolitical circumstances.

From ‘Durant Syndrome’ to ‘Reciprocity’

India and Nepal—being proximate neighbours in the Himalayan geopolitics—have a special relationship marked by open borders and entrenched people-to-people contacts. The free movement of people across the Himalayan borders has been a distinct feature for decades. Nepal, a country of 29 million population, has a border of over 1850 kilometers in the east, south and west with five Indian States–Sikkim, West Bengal, Bihar, Uttar Pradesh and Uttarakhand–and in the north with the Tibetan region of China. Successive governments in New Delhi considered the India-Nepal Treaty of Peace and Friendship of 1950 as “the bedrock of the special relations” between India and Nepal. Under Article 6 of this Treaty, the Nepalese citizens have enjoyed unparalleled advantages in India, availing facilities and opportunities at par with Indian citizens (Government of India, Ministry of External Affairs 1950). As such, nearly 6 million Nepali citizens live and work in India (Government of India, Ministry of External Affairs 2017). New Delhi, therefore, expected some sort of diplomatic finesse and political loyalty from Kathmandu.

However, the ruling dispensations as well as different sections of the Nepalese society did not appreciate this perpetual loyalty, particularly under the mutual ‘security’ arrangements with India under the Treaty of Peace and Friendship, 1950.  The main criticism was that the Treaty was ‘unequal’ and that it was signed when the Ranas were in power; and therefore it did not represent the goals and aspirations of the new government in Nepal. Though the new ruler King Tribhuvan’s period was characterized by Nepal’s  special relations with India, it did not last long. There were protests and criticisms about India’s growing influence in Nepal. When King Mahendra came to the throne in 1955, a change in Nepal’s policy was quite visible. His was a more assertive policy intended to substitute Nepal’s ‘special relations’ with India—obviously in favour of ‘equal friendship’ with all countries. It was in line with this that Nepal established diplomatic relations with China in 1955. The changing dimensions of India-China relations after the development of border issues—especially with the Lhasa uprising in 1959—tended to influence Nehru’s security perceptions, and his statements and postures testify this. In a Lok Sabha speech, he said: “May I just say this to repeat what we have said previously, that any aggression on Bhutan and Nepal would be considered by us as aggression on India….It is a very grave responsibility” (India, Lok Sabha 1959:2211). This naturally set in motion anti-India feelings and sentiments in Nepal.

In April 1960 Nepal and China signed a Peace and Friendship Treaty.  Earlier a boundary agreement was also signed by the two countries. King Mahendra also negotiated for building a road connecting Kathmandu with Chinese (Tibetan) border at Kodari. But this generated a high tension campaign in India and there were demands for the cancellation of the construction. But King Mahendra dismissed all this and reminded India that “Communism does not travel by Taxi cab” (see The Kathmandu Post, 7 April 2017). During the India-China war in 1962, Nepal maintained a neutral position and made no effort to understand New Delhi’s sensitivity.  This was also the time when King Mahendra sought to diversify Nepal’s trade and economic relations, instead of maintaining dependence on India.  Since then Nepal’s foreign trade had been very gradually changing, and total trade with India declined from 98 per cent in 1958-59 to 95 per cent in 1959-60, even as that with Tibet and overseas countries growing (Pant 1962: 362-63).

The idea of Nepal as a ‘Zone of Peace’ became a key foreign policy proposition when King Birendra came to the throne in January 1972. The proposal was initially planned to be floated at the fourth Non-aligned Movement summit at Algiers in September 1973 (Government of Nepal, Embassy of Nepal, Washington, DC US 2018).  But the idea was apparently dropped by the King albeit the text of the speech brought out to the media earlier had a reference to the proposal that “Nepal, situated between two of the most populous countries in the world, wishes within her frontiers, to be enveloped in a Zone of Peace (Rising Nepal 9 September 1973.)

However, the official announcement came after two years on 25 February 1975, on the occasion of the official coronation of the King. He said:

As a matter of fact Nepal in the past has signed formal peace and friendship treaties with both our friendly neighbours. And if today, peace is an overriding concern with us, it is only because our people genuinely desire peace in our country, in our region and everywhere in the world. It is with this earnest desire to institutionalize peace that I stand to make a proposition that my country, Nepal be declared a zone of peace. Only under a condition of peace we will be able to create a particularly stable Nepal with a sound economy which will in no way be detrimental to any country. I also wish to declare that in making this proposition for a zone of peace, we are not prompted out of fear or threat from any country or quarter (King Birendra 1977: 12).

Further elaboration of the idea came much later, in February 1982, when the then Prime Minister, S.B. Thapa articulated a seven point definition of the “Zone of Peace” proposal which also included a reciprocity in commitments regarding security and other internal issues. By 1991, Nepal’s proposal had been endorsed by more than 110 nations, which included the United States, Pakistan, Sri Lanka, Bangladesh etc. Many of these countries also recommended a regional approach to peace as the goal (Government of Nepal, Embassy of Nepal, Washington, DC US 2018).

M.K. Rasgotra, former Indian Ambassador to Nepal and, later, the Foreign Secretary of India, writes that Nepal always had some sort of  a ‘Durant Syndrome’ – a kind of strategy to play China against India in pursuit of its interests. The term ‘Durant Syndrome’ is a reincarnation of the security notion of the British Resident Edward Durant (1988-1891) who at that time wrote to his foreign office that “the settled policy of the durbar is to play of China against us and to make use or pretended subordination to that power as a safeguard against the spread of our influence over this country.”  Rasgotra took a step further and wrote that “Nepal durbar was actually trying to reduce, if not eliminate, India’s interests, role and influence in the country” (Rasgotra 2016: 310). Prime Minister Indira Gandhi was quoted as saying that the rulers in Kathmandu “can not to be trusted. They say one thing and do the opposite. I do not like that. They are not our friends…Be firm in dealing with them” (Ibid: 297). Rasgotra again noted that within a few weeks of his arrival in Nepal, he found that the Royal regime had tilted towards China, and actively encouraged anti Indian propaganda while blatantly violating trade treaty provisions.  Rasgotra wrote that “India would have to learn to live with the Nepal Government’s Durant Syndrome. I advised the Government to neither accept nor reject the Zone of Peace proposal and keep asking the Nepalese what its implications will be for India-Nepal relations, to the rights Nepalese enjoy in India in matters of residence and employment, and to India’s security and other interests.”  He said that the Nepalese Government also started insisting that there should be two separate treaties for transit and trade. But this was rejected by New Delhi. However, as things turned differently in the 1977 general elections, Nepal was able to secure two treaties, which was made possible by the Janata Government led by Moraji Desai (for details see Ibid: Chapter 20). During the period, India’s External Affairs Minister Atal Bihari Vajpayee was reported to have said that India had an “open mind” on the proposal to declare Nepal a zone of peace: “We have neither accepted the proposal nor rejected it,” Vajpayee said. He had promised the leaders in Kathmandu that India would consider the proposal with an open mind (Sunday Standard, 17 July 1977).

The decade of 1980s witnessed many developments in the region such as the beginning of India’s border talks with China, militarization and arms build-up of the subcontinent following the Afghan war etc. By the end of 1980s, however, there was a serious setback in India’s relations with Nepal. It all started when India refused to renew the trade and transit treaties with Nepal. The Rajiv Gandhi government argued that Nepal resorted to ungrateful moves by imposing work permit on Indian workers in Nepal, tariffs on goods imported from India and, above all, importing military items from China without India’s consent—apparently in violation of the 1950 Treaty !

New Delhi, however, insisted a composite treaty for trade and transit—obviously to prevent Nepal from diversifying its trade. Nepal demanded two separate treaties as they existed—one for trade and the other for transit. Kathmandu’s position was that under the UN law, transit was the right of a land-locked country.  Failure to renew the treaties, however, resulted in the closing of the India-Nepal transit points for trade and transportation, amounting to a serious economic blockade which lasted for several months during 1989-90. Even essential supplies were disrupted for months. This was also the time when Nepal witnessed a surge in democratic movements. However, with a new government in office in Kathmandu, Nepal and India sorted out the impasse. Yet, the unexpected economic blockade remained a permanent scar in India-Nepal relations.

There was a significant change in India-Nepal relations during the mid-1990s. IK Gujral, who was India’s foreign minister, and later prime minister, was instrumental in improving India’s relations with small neighbours under his much-acclaimed ‘Gujral Doctrine.’ The five principles of Gujral Doctrine envisage that (1) “With Bangladesh, Nepal, Bhutan,  Maldives and Sri Lanka, India would not seek reciprocity, but would give and accommodate what it could in good faith and trust;(2) No South Asian country should allow its territory to be used against the interest of another country of the region;(3) No country should interfere in the internal affairs of another;(4) All South Asian countries must respect each other’s  territorial integrity and sovereignty; (5) They should settle all their disputes through peaceful bilateral negotiations” (Gujral 2011:406). Perceptibly, the principle of non reciprocity helped strengthen India’s relations with Nepal, Bangladesh, Sri Lanka etc.

However, the Nepali politics began to experience several twists and turns which eventually resulted in the termination of constitutional monarchy and the emergence of democratic forces. The pattern of India-Nepal relations also witnessed some changes with political forces in the country demanding a revision of the 1950 Treaty and further concessions from India. There were occasional setbacks in bilateral ties also. This was also the period when Nepal began exploring the option of strengthening relations with China. It had reasons to do so. There was also a surge in India’s relations with China (leaving aside the boundary question) and bilateral trade between the two giants has been growing since 2001.

Over years, China has been making quick moves in Nepal to be its paramount neighbour—even overtaking the status enjoyed by India for long. Naturally, there have been growing suspicion and anxiety with regard to Nepal’s broadening relations with China. Many in India shared the concern that Kathmandu had “gone a bit too far and too fast” in strengthening relations with Beijing (Shrestha 2017). For geopolitical and geoeconomic reasons, Nepal is seen as vital for China. There are many perceptible reasons which led to the deepening ties between Nepal and China.

First, Nepal has encountered two major episodes of economic blockade by India—in 1989 and 2015—and that it cannot afford to have another one, given the prevailing social and economic conditions. Nepal’s land-locked status—in particular its ‘India-locked’ geopolitics—compelled the ruling dispensation to further diversify trade, as in the past. Nepal is also interested in China’s ‘One Belt, One Road (OBOR)’ Initiative which the rulers consider as very important for Nepal’s long-term development. It may be noted that after the 2015 blockade, Nepal moved towards China and signed a transit trade treaty including nine other pacts on 22 of March 2016 (Ibid). The OBOR pact  between Nepal and China have five broad areas – economic development; transport connectivity; trade connectivity (economic zone, industrial park, and dry port development); financial integration through opening branch of Chinese bank and People-to-people contact through visits and media(Ibid).

Meanwhile, Nepal’s exports to India have grown more than eleven times and bilateral trade more than seven times since 1996. The bilateral trade that was 29.8 per cent of total external trade of Nepal in 1995-96 grew to 61.2 per cent in 2015-16. The two-way trade increased from INRs. 1,755 crores in 1995-96 to IN Rs.32294 crores (US$ 4.8 billion) in 2015-16. Exports from Nepal to India saw a jump from INRs. 230 crores in 1995-96 to INRs.2468.3 crores (US$ 371 million) in 2015-16. Likewise, India’s exports to Nepal grew from INRs.1,525 crores in 1995-96 to INRs.29825.7.6 crores (US$ 4.48 billion) in 2015-16. Indian companies are the biggest investors in Nepal, accounting for about 40 per cent of the total approved FDIs. There are about 150 Indian ventures working in Nepal, basically in manufacturing, services (banking, insurance, dry port, education and telecom), power sector and tourism industries (see Government of India, Ministry of External Affairs 2017a, b).

Even as India-Nepal trade registered a significant increase over years, Nepal’s economic ties with China also showed a big leap. Nepal’s export to China saw a jump by 72 per cent during 2017-18. As Nepal has been struggling to reduce its burgeoning trade deficit, the surge in exports to China was seen as a great relief to the country which has been heavily dependent on remittance for financing most of its imports. Nepal exported goods worth US $17 million to China during first seven months of the fiscal period 2017-18, an increase by 72.3 per cent over the same period last fiscal year (Xinhua News 2018).

Nepal’s desire to escape from “the state of a land-locked to a land-linked country through the development of adequate cross border connectivity” means many things for both India and China. Even under Article 125 of the United Nations Convention on the Law of the Sea (1982), Nepal has legitimate claims as a land-locked country insofar as it protects the right of transit, as well as endorses rights over the resources and possibilities of the high seas (UN 1982).  Yet, India glossed over the fact that these provisions have provided Nepal many entitlements even as the people were made to suffer under two spells of economic blockade in 1989-90 and 2015.  Situated as it is in a sensitive hot-spot of the Himalayas, Nepal’s aspirations to come out of this geopolitical shell appear to be reasonable This certainly calls for a much deeper appreciation of Kathmandu’s quest for a ‘Zone of Peace,’ especially in India and China.

References

Government of India, Lok Sabha (1959): Debates, 2^nd Series, Vol. 35, 27 November.

Government of India, Ministry of External Affairs (2018b): “India-Nepal Joint Statement during the State Visit of Prime Minister of India to Nepal, May 11-12, ” https://www.mea.gov.in/bilateral-documents.htm?dtl/29894/IndiaNepal_Joint_Statement_during_the_State_Visit_of_Prime_Minister_of_India_to_Nepal_May_1112_2018

Government of India, Ministry of External Affairs (2018a): Prime Minister’s speech at Civic Reception in Kathmandu during his visit to Nepal (May 12, 2018), http://www.mea.gov.in/Speeches-Statements.htm?dtl/29895/Translation_of_Prime_Ministers_speech_at_Civic_Reception_in_Kathmandu_during_his_visit_to_Nepal_May_12_2018

Government of India, Ministry of External Affairs (2017a):”India-Nepal Relations,” http://fsi.mea.gov.in/Portal/ForeignRelation/India_Nepal_Relations_11_04_2017.pdf

Government of India, Ministry of External Affairs (2017b):”India-Nepal Relations,” http://www.mea.gov.in/Portal/ForeignRelation/Nepal_November_2017_new.pdf

Government of India, Ministry of External Affairs (1950): Treaty of Peace and Friendship between the Government of India and the Government of Nepal,“ 31 July 1950,  http://mea.gov.in/bilateral-documents.htm?dtl/6295/Treaty+of+Peace+and+Friendship

Government of Nepal, Embassy of Nepal, Washington DC, US (2018): “Foreign Policy,” https://us.nepalembassy.gov.np/foreign-policy/ (accessed on 23June 2018).

GT (2018): “Nepal can be a bridge between China and India” Global Times, 21 June, at http://www.globaltimes.cn/content/1107848.shtml

Gujral, I.K. (2011): Matters of Discretion: An autobiography, New Delhi: Hay House India.

King Birendra (1977): Speeches, Proclamations and Messages, Kathmandu: His Majesty’s Government of Nepal.

Rasgotra, M.K. (2016): A Life in Diplomacy, New Delhi: Penguin Viking India.

Pant, Y.P. (1962): “Nepal-India Trade Relations: Some Recent Trends,” The Economic Weekly, 24 February,  https://www.epw.in/system/files/pdf/1962_14/8/nepalindia_trade_relationssome_recent_trends.pdf

 Shrestha, Hari Prasad (2017): “Growing Nepal China Friendship of Equality and Reliability,” 23July, South Asia Journal, at http://southasiajournal.net/growing-nepal-china-friendship-of-equality-and-reliability/

Sunday Standard (1977): “Forty Years ago: Vajpayee in Nepal,” 17 July, available at https://indianexpress.com/article/opinion/columns/july-17-1977-forty-years-ago-vajpayee-in-nepal-4753658

UN (1982) “United Nations Convention on the Law of the Sea 1982”, available at http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf

UN, Committee for Development Policy (2018): Vulnerability Profile of Nepal, https://www.un.org/development/desa/dpad/wp-content/uploads/sites/45/CDP-PL-2018-6c.pdf

Xinhua News (2018): “Nepal’s export to China surge by 72 percent, 9 March, http://www.xinhuanet.com/english/2018-03/19/c_137049557.htm

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